Contract provisions may tie up Vero Beach electric sale

VERO BEACH — The city's failure to completely extricate itself from a power consortium has the potential to delay the sale of the city's utility system.

The worst-case scenario, according to officials, is that a potential sale of the system to Florida Power & Light Co. might be delayed to the fall of 2016.

City Manager Jim O'Connor, however, believes the city is still on track for a potential sale in January 2014.

City Councilmember Jay Kramer isn't as optimistic.

The potential fly in the ointment is contractual obligations the city has as a member of the All Requirements Project, a coalition of 15 cities belonging to the Florida Municipal Power Agency that joined together in a power supply agreement beginning in 1985.

At one time, all Vero Beach's power was provided from power agreements this coalition had entered into.

Vero Beach also sold some power produced by its power plant to the group. Eventually, city officials came to feel they were not being fairly compensated for power produced by the plant and decided to get out of the city's obligations to sell and buy power through the coalition.

It took five years, but by Jan. 1, 2010, the city no longer was obligated to take any power from the All Requirements coalition and it entered into a supplementary power supply contract with Orlando Utilities Commission.

The city, however, technically still is a member of the group and potentially could share in some liabilities that might be incurred by the group. It also still is bound by a contract provision restricting it from selling the electric system without meeting a series of conditions.

To totally removed itself from the contract, the city has to give notice of its intent three years in advance. It didn't take that action until recently — and even then apparently failed to follow proper procedures.

Former City Attorney Charles Vitunac said the city did not give notice before 2010 because city officials at the time had no intention of selling the municipal electric utility. He still contends such a sale will be detrimental to the city.

O'Connor did send out letters the middle of last month to get out of the All Requirement Project, but apparently not to all the member communities. FMPA Attorney Fred Bryant notified the city of this deficiency in an Oct. 11 email.

If the letters had been properly sent out by Oct. 1, the beginning of the fiscal year, the city could have gotten out of the contract by Sept. 30, 2015, according to FMPA Assistant General Manager Mark McCain. Failure to meet that deadline means the earliest the city can exist the contract is Sept. 30, 2016.

Vitunac and Kramer were critical of the city's transactional attorneys in regard to the issue. O'Connor said he shared in any blame. He noted, though, he and the attorneys were dealing with a number of other issues, such as settling the city's current power supply contracts, which he deemed more critical to the transaction.

O'Connor said the city will ask for a waiver of the three-year waiting period from the other 14 members of the All-Requirements Project at the same time it sends over documents to the agency asking for approval of a transfer of its other power contracts to Orlando Utilities Commission. He doesn't see why the cities would deny the waiver, which only moves up a couple of years the city's eventual exit from the All Requirements contract.

In addition, he said all indications from FMPA are that the agency wants to work with Vero Beach to help it achieve its goal.

Kramer, however, noted "it just takes one (of the All Requirements Project cities) to say no," to the waiver request. O'Connor said he would think a city would have to show how it was being harmed somehow before turning down the city's waiver request. Right now, FMPA officials do not know of any financial liabilities the city would be responsible for in connection with the contract, but they are still analyzing the situation.